Swiss politicians these days receive many British visitors who want to know what it is like for a country to be European without having EU membership. At the same time, Dutch far-right politician Geert Wilders says the Netherlands should quit the EU and be like Switzerland. “Switzerland is the example,” he said on RTL television in May 2014, praising the country’s sovereignty, immigration policies, direct democracy, and economic prosperity. And Germany’s far-right, anti-Islam Pegida movement repeatedly singles out Switzerland in its manifesto as an example to follow.

These politicians and political parties argue that all will be better if their countries pull out of the EU. They are wrong. Switzerland is essentially as dependent on Brussels as EU countries are. In fact, the Alpine country is losing as much sovereignty and democratic impact as EU members. The problem is not Brussels. It is globalization.

As a nation with one of the world’s most open economies, Switzerland increasingly has to play by global rules. Those rules are not set in Bern. After fierce battles with the U.S. tax authorities in recent years, the Swiss have de facto given up their banking secrecy, which is enshrined in the country’s constitution. If they had not handed over thousands of bank files on American citizens, Swiss banking giants UBS and Credit Suisse would have lost their license to do business on Wall Street. Without this license, a bank cannot trade in dollars—in other words, it is dead.

Washington presented Bern with a clear-cut choice: Either play the global game and have the world’s biggest banks, or play the sovereign game and shield foreign bank clients in your country. You can no longer have it both ways—especially as a small country.

Switzerland once was a safe haven for dictators’ fortunes. No more. After heavy international pressure, particularly since the 9/11 terrorist attacks on the United States, Bern now clamps down on money launderers and scrutinizes politically exposed individuals. And after the recent U.S. crackdown on officials of football’s world governing body FIFA in Zurich, Swiss lawmakers will finally change a decades-old law that exempts sports associations from scrutiny.

Almost half of Switzerland’s imports come from Germany, Italy, or France. The Swiss said no to joining the European Economic Area in a referendum in 1992, but they need access to the EU’s internal market, which completely surrounds their country. So Bern has concluded many bilateral treaties with Brussels that require Switzerland to adhere to the basic rules governing the internal market—free movement of goods, people, capital, and services.

In February 2014, the Swiss voted in a referendum to impose restrictive quotas for foreigners wishing to live in Switzerland. The Swiss feel swamped, even if figures show that 85 percent of these foreigners are European citizens, mostly well-educated ones such as German engineers or French doctors, on whom the Swiss economy depends. To this day, Bern has not figured out how to square this vote with free access to the EU market, showing how important Brussels is even for EU outsiders.

Swiss lawmakers draft most legislation and regulations in such a way that Swiss companies have access to the EU’s internal market without facing two incompatible sets of rules. Just like Norway, which voted against EU membership in 1994, Switzerland more or less copies EU law into its national legislation without having any influence over its content. (The Norwegians call this the fax economy.)

When EU leaders in Brussels discuss banking regulations or provisions on the EU’s passport-free Schengen Area—rules that directly affect Switzerland, the Swiss president is absent. The Swiss ambassador doesn’t get farther than the press room.

The eurozone crisis is also as costly for Switzerland as for EU states. Investors have been selling euros and buying safer Swiss francs for several years now—ever since the start of the euro crisis. This made the franc and Swiss products so expensive that in 2011, the Swiss National Bank pegged the franc to the euro. The bank bought billions of euros to keep the exchange rate stable. In early 2015, the bank abruptly abandoned the peg, having amassed about $480 billion worth of foreign currency, equivalent to 70 percent of Switzerland’s GDP.

Because of this so-called Francogeddon, the Swiss stock market crashed, hedge funds took big losses, and prices shot up again. More than ever before, Swiss citizens flock over the border to neighboring EU countries to buy eggs, furniture, or wine for half the price. Many people would gladly pay a fine for buying more than the allowed quantities, because most of the time they are not caught. According to the journal Intereconomics, “seldom have the well-being of the Swiss economy in general and the success of Swiss monetary policy in particular been this dependent on the euro.”

Because the Swiss need to apply so many global rules and EU regulations, their self-rule is also compromised. Many Swiss citizens find their country’s system of direct democracy is not functioning as it used to. Voter turnout in general is below 50 percent, far lower than in most EU member states. Ten years ago, several villages around Geneva reported that turnout for a referendum had declined to 30–40 percent, with the extreme right-wing Swiss People’s Party ahead nearly everywhere.

A former village mayor conceded to me that Swiss locals had become rich by selling vineyards to multinational companies and by renting out houses to the new globalized middle class. Life was good, he said; the well-off immigrants Switzerland had managed to attract made other nationals green with envy. “But we’ve sold our souls and destroyed our social tissue,” he added. Another official complained that the government was ignoring the Swiss refusal to join the EU: “It doesn’t matter how we vote. Every year, we get more EU regulation via the back door.”

So those who claim that certain EU member states should leave the union and be like Switzerland are deceiving the electorate. Switzerland has the same problem as EU countries: a considerable loss of sovereignty. The cause is not Brussels, but globalization. Quitting the EU is therefore a false remedy, and it is time those fantasists up north realized that.

Caroline de Gruyter is the Vienna correspondent for NRC Handelsblad and the author of the recently published Zwitserlevens. She was previously based in Brussels and Geneva.

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stevemid

June 18, 201511:39 am

From Australia I have been awestruck with the progress Europe has made nuturing the European Union. I have neither the history nor the proximity to judge the anti-EU sentiment. However the author makes very strong arguments in favor of sticking with the Union, the strongest of which is only implied: protecting the dignity and humanity of residents from the onslaught of globalization. United you stand, divided, you have no hope of regulating corporations.
Europe needs to go forward, not backward with multilateralism. The EU needs to take up the issue of its own military and the pressing issues of refugees and a mature relationship with Russia. Certainly as individual countries you could lock the gates against a mother and child from Syria, but managing Superpowers (including the US and Russia) cannot be done in isolation.

Your Labelling of the Swiss People's Party as "extreme right wing" is simply ridiculous. I say this without being a member of this party. The SPP is part of the Swiss Government for almost 100 years now. In Cantons like Schwyz, Aargau or Thurgau the SPP has a solid relative majority for decades. These Cantons belong to the most successful in Switzerland. Under your categories, you might as well take the Bavarian CSU, the British Tories, the Spanish Partido Popular as extreme right wing parties. The social-democrats then would be "extreme left wing". It's pretty amazing that a Geneva-based correspondent would not know better.

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belgo

February 21, 201611:29 pm

I don't think it's ridiculous at all. UDC is definitively a xenophobic party. You only need to look at the posters that are currently in the streets (white sheep kicking a black sheep out of Switzerland) or the leaflet I have here on my desk to realize that the Swiss People's Party is not a party to be compared to the conservative party in other European countries. It's a party that tries to make foreigners the scapegoat for all problems in Switzerland. It does indeed remind me of Haider's extreme right party in Austria.

I like to read the Carnegie contributions. But the article "The Switzerland Fantasy" is just beyond the pale.
Two statistics: Per capita income (PPS, EU27/28=100) in 2003: Austria 127, Switzerland 143; in 2014: Austria 128; Switzerland 161.
Average turnout in referendums in Switzerland 44%, turnout in the European election in May 2014: 42.5%.
Switzerland is not the paradise, but it looks better by the year, compared e.g. to a similar EU country like Austria.

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Chris Freytag

July 04, 20154:25 am

Core argument is excellent - very sound. Not to mention the international political neutrality of Switzerland. The British could never be neutral given their widespread Commonwealth ties. They would fare better visiting Sweden. Doubt Cameron is serious about leaving the EU, only using as bargaining chip.

I disagree. Trade agreements and standards for the industry has nothin gto do with handing over sovereignity. but i see the issue not with the sovereignity.the problem is elsewhere: brussel is simply a huge, inefficient political moloch that is dangerous for all members of the eu. only by exiting the eu htere is a change for a sleeker, more powerful and fairer europe i believe.

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Iamaswiss

December 23, 20154:57 pm

Quote "..........the Swiss stock market crashed, hedge funds took big losses, and prices shot up again. More than ever before, Swiss citizens flock over the border to neighboring EU countries to buy eggs, furniture, or wine for half the price. ...." .
The stockmarket fell because Swiss companies will now find it more difficult to sell their wares to European customers (high-rolling Europeans are already complaining about the price of this year’s skiing holidays).
Further more, Swiss bordering with many countries & have always been purchase good from neighboring countries, not only because goods cost less, also it's convenient to do so. You made it sound like the entire Switzerland flock to the border to purchase goods, I find it laughable.
My friends often travel to Lake Constance which bordering with Germany(so you know), they would purchase toothpastes, shampoo ... etc. To make it clear to you, they are with 6 digit income per person, none of them short on money, "Why they do it ?" You might ask, they will tell you:: "It's fun to bring some "thing" home from outside of Switzerland".
My husband and I went to Lake Constance in 2012 and our second visit in summer 2014 had made us dislike the place even more. We bought a American flag and a Scotland flag during our first visit.
Yes, there might be some lower income Swiss, they might require little more saving over the others, the way you "put down" those poor Swiss people whether intentionally or not, gives me the impression "What an unsympathetic person you really are."
The House of Representatives passed legislation to strengthen the visa waiver program in the aftermath of attacks in Paris and San Bernardino, California. The legislation is considered likely to advance through the Senate and become law by the end of the year.
America had "ban" Muslim family US entry, also "ban" visa-waver, I cant wait to read about your opinion on the Americans.

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Danu

April 20, 20177:57 am

(1/3)
This article is nearly two years old, but I'll leave a comment anyway, in the hope that the author can learn something about the topic she is writing about, because she evidently doesn't understand much of it. As a Swiss, it has become tiresome to see EU people write these sort of snarky feel-good articles about my country's relationship with the EU, which convey very little information apart from the author's obvious strong feelings on the matter, and which more often than not contain (if at all) false or unverified pseudo-facts. The only result is the hindrance of dialogue between our respective (European) societies, and with further European cooperation left out to dry as a consequence. I very much hope that this will not be the attitude adopted by EU citizens during the Brexit phase, or else we won't have to wait for the Russians to beat Europe down, we will do it ourselves.
> the Swiss have de facto given up their banking secrecy, which is enshrined in the country’s constitution.
That's not true. Banking secrecy is not and has never been in any of our constitutions, although there is an upcoming popular initiative to make it so. Banking secrecy was first an unwritten convention within the industry, before being incorporated into a private law by the Swiss banking association, and was only officially incorporated by the Swiss parliament in the 1934 banking law.
> but they need access to the EU’s internal market, which completely surrounds their country. So Bern has concluded many bilateral treaties with Brussels
That's not true. Switzerland always has access to the EU's market (and vice versa) because both parties are members of the WTO. There is even tariff-free access in almost all areas because of the 1972 Swiss-EEC Free Trade Agreement. What the Bilateral Agreements are aimed at are the harmonization of non-tariff barriers, such as technical certificates, streamlined administrative procedures or recognition of regulatory equivalence. If they should fall, market access would remain unchallenged on both sides, but we would be talking about non-tariff discrimination of trade based on nationality in each market. It would be a matter of competitivity, not market access.

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Danu

April 20, 20178:07 am

(2/4)
> that require Switzerland to adhere to the basic rules governing the internal market—free movement of goods, people, capital, and services.
That's not true. Switzerland's participation in freedom of movement of services is quasi non-existent (with the notable exception of the agreement covering certain types of insurances, which is not part of the Bilaterals), and zero on movement of capital (despite both being requested by Switzerland from day 1, and both consistently refused by the EU). Participation in the other two are also incomplete (more so in the movement of goods than that of persons).
> To this day, Bern has not figured out how to square this vote with free access to the EU market, showing how important Brussels is even for EU outsiders.
That's misleading. The headache stems from the legal incoherence in the initiative's text, requiring the Federal Council to ignore the agreement of the movement of persons through executive order, which is illegal under Swiss law (ratified treaties directly counting as laws, and therefore inviolable by executive orders), since the text doesn't say that the treaties in question need to be canceled (and the authors of the initiative explicitly spelled out several times before the vote that the Bilaterals would in no way be endangered).
> Just like Norway, which voted against EU membership in 1994, Switzerland more or less copies EU law into its national legislation without having any influence over its content. (The Norwegians call this the fax economy.)
That's misleading. Only some specific regulations are copied (such as in the area of Air Traffic or Schengen), but there is still a sizable margin for implementation in the other domains, in big part due to the structure of the Bilateral Agreements (no obligation to take ECJ legal interpretation into account, no body supervising the implementation, no court for dispute settlement), though Switzerland doesn't advertise that aspect for obvious reasons. We can see this margin at work with, for example, the Swiss 8-day rule for posted workers.

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Danu

April 20, 20178:08 am

(3/4)> When EU leaders in Brussels discuss banking regulations or provisions on the EU’s passport-free Schengen Area—rules that directly affect Switzerland, the Swiss president is absent. The Swiss ambassador doesn’t get farther than the press room.
That's not true. We fully participate in the discussions concerning Schengen, as we have the same consultative right as any other members, we just don't vote (like the other non-EU Schengen members). However, this statement would be true for the banking regulations. But it is worth mentioning that Switzerland (as mentioned above) doesn't work with the EU on banking regulations, and so is not directly affected by it. On the things that do affect Switzerland directly (such as regulations on goods), the EU brings it's changes to the yearly joint committees where the eventual changes to the Bilateral Agreements are negotiated according to the rules of diplomacy.
> Many Swiss citizens find their country’s system of direct democracy is not functioning as it used to.
I have absolutely no idea where the author took that from, it's simply not true. If anything, we vote more often than we did in the past. And as poll regularly show, we trust our institutions much more than any other country does, which in turn also explains the low voter turnout.
> with the extreme right-wing Swiss People’s Party ahead nearly everywhere.
This was more true 2 years ago, but even then the SVP only was ahead in the lower chamber of parliament. It always struggled to be represented in the cantonal governments and parliaments (particularly in the French-speaking side), and is one of the weakest fractions in the upper chamber of parliament. They certainly have shown a lot of strength in some aspects since the 2000s, but not across the board - the Swiss democracy has much more depth than that.

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Danu

April 20, 20178:08 am

(4/4)
> Another official complained that the government was ignoring the Swiss refusal to join the EU: “It doesn’t matter how we vote. Every year, we get more EU regulation via the back door.”
Somebody should remind this official that we voted 4 times on this web of agreements with the EU, and we voted 4 times positively. Plus, each change to them is subject to the possibility of an optional referendum, which is the whole point of the sectoral approach. The democratic legitimacy of the agreements is guaranteed.
I agree with the author that globalization is fundamentally a concern for the self-rule of smaller states, but it is definitely not unmanageable. I would like to remind the author that Switzerland has been a fervent supporter of multilateral-ism from the day WW2 ended (and still does today), while the EU's founders insisted on pursuing regionalism instead. And it's exactly this regionalism that is a threat to Swiss democracy, not globalization in general.

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Danu

April 20, 20178:09 am

(4/4)
> Another official complained that the government was ignoring the Swiss refusal to join the EU: “It doesn’t matter how we vote. Every year, we get more EU regulation via the back door.”
Somebody should remind this official that we voted 4 times on this web of agreements with the EU, and we voted 4 times positively. Plus, each change to them is subject to the possibility of an optional referendum, which is the whole point of the sectoral approach. The democratic legitimacy of the agreements is guaranteed.
I agree with the author that globalization is fundamentally a concern for the self-rule of smaller states, but it is definitely not unmanageable. I would like to remind the author that Switzerland has been a fervent supporter of multilateral-ism from the day WW2 ended (and still does today), while the EU's founders insisted on pursuing regionalism instead. And it's exactly this regionalism that is a threat to Swiss democracy, not globalization in general.

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